Oil prices hit year-high, boosted by supply cuts from OPEC+

Oil prices rallied high at the first trading session of the week with Brent futures nearing $60 a barrel, boosted by supply cuts among OPEC+ members and hopes that the stimulus package in play at the world’s largest economy would see the light of the day.

What you should know: At the time of writing this report, Brent crude traded at $59.95 a barrel thereby touching its one-year high.

Also U.S. West Texas Intermediate crude futures rallied by 1%, to $57.39 a barrel, the highest since January 2020.

• Oil traders are going long amid market sentiments, showing that the recent poor U.S Jobs report would trigger the immediate passage of the U.S stimulus deal, thereby boosting the prices of commodities.

READ: Oil prices drop amid fears on energy demand softening

Stephen Innes, Chief Global Market Strategist at Axi, in an explanatory note to Nairametrics, spoke on the prevailing macros keeping oil prices up.

“Oil is trading higher at Asia open getting a kick start from the US stimulus effect and a slightly weaker dollar. As well, preliminary OPEC production data for January also suggests compliance with OPEC+ quotas improved in January.

“With the virus showing signs of burning out, albeit, from lockdown abatement, still with vaccines rolling out faster than energy markets predicted, oil traders feel comfortable adding length at current prices, even more so with China’s demand holding up despite higher physical market prices.

“As speculative forces and real physical demand coalesce, it usually ends up with surging and bubbling crude prices.”

READ: Oil prices up, Saudi Aramco says energy demand will soon return to pre-COVID-19 era

What to expect

Oil traders have also become more convinced that energy consumption will soon pick up considerably in the world’s largest economy, due to faster than expected COVID-19 vaccination protocols, meaning oil prices are expected to stay above $55/barrel, at least for the mid-term.